Fitch Affirms Pan-American Life's IFS Ratings; Outlook Stable

December 10, 2012 04:57 PM Eastern Standard Time

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'A' Insurer Financial Strength (IFS)
rating of Pan-American Life Insurance Company (PALIC) and its wholly
owned subsidiary, Pan-American Assurance Company (PAAC), collectively
referred to as Pan-American. The Outlook is Stable.

The rating affirmation reflects the company's continued very strong
capitalization, relatively low risk liability profile, improved
operating performance, and conservative financial management. The
ratings also consider Pan-American's relative position within the
Fitch-rated universe, which includes companies that have significantly
greater scale, market share, pricing power and distribution capabilities.

Pan-American's very strong balance sheet continues to be a key ratings
driver. The company's risk-based capital was estimated at 502% at Sept.
30, 2012 compared to 563% at year-end 2011 following a $17 million
dividend paid to the holding company. Operating leverage of about 5x
compares favorably to an industry average of 9x. Consolidated financial
leverage for the Pan-American Life Insurance Group, Inc. (PALIG) is
moderate at 16% and the total financing and commitments (TFC) ratio is
.19x.

Fitch believes that Pan-American's earnings have become increasingly
stable and predictable as management has successfully streamlined
operations and addressed legacy issues. Fitch also notes that
Pan-American's target markets are making a larger contribution to
earnings, and the company is less reliant on its closed block of
ordinary life business in the U.S.

Fitch believes the acquisition of select Latin American and Caribbean
businesses of MetLife, Inc. will allow the company to expand its
footprint in the region although Fitch acknowledges the inherent
execution risk. Fitch believes successful integration of this business
will improve the mix of Pan-American's revenues and earnings between its
core segments.

Pan-American has little exposure to equity market volatility or
disintermediation risk given its liability structure, which is made up
primarily of life insurance and accident and health reserves. Operating
cash flow is good, and PALIC is a member of the Federal Home Loan Bank
of Dallas, which provides borrowing capacity of roughly $100 million, of
which $50 million was utilized as of Sept. 30, 2012.

Fitch does not anticipate an upgrade in the near-to-intermediate term.
Fitch views Pan-American as a solid niche player which under Fitch's
criteria has a market position, size and scale supportive of a 'BBB'
rated company. However, the company's very strong balance sheet
fundamentals provide Pan-American with an uplift in its rating to the
'A' category. Fitch does not expect a change in the balance of these key
rating attributes to occur over the ratings horizon.

Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.

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